California Change in Property Ownership

Californians who make it their business to know – now understand that triggering property tax reassessment to “a new Base Year Value” as a result of new construction to a home, or a complete change in ownership – which makes it virtually impossible to establish  a low property tax base; and results in a yearly tax rate that increases abruptly to  current or “fair market” rates.

Translation in everyday language – you pay much higher property taxes every year. For example, the different between $600 per year and $9,000 per year. Significantly higher property taxes.

Every County Tax Assessor in California, in all fifty-eight counties, records and reviews every single property deed in every county, to figure out which homes and various other real properties require reappraisal, and which do not. The Tax Assessors also determine ownership changes with other investigative tools such as such as kept records from homeowner self-reporting, or from records of building permits; from newspaper files; or field inspections.

When a County Tax Assessor has determined that a property has changed ownership, Proposition 13 stipulates that the County Tax Assessor must reassess that property to its current (i.e., fair market) tax rate, as per the date of change of ownership.

Because property taxes in California are based on a property’s assessed value – at the time of acquisition – the property taxes will be increased if the current market rate is higher than the original assessed Prop 13 base year value adjustment. Therefore – if the current market tax rate is lesser than the previous adjusted base year value assessment, then taxes on that property will go down. Which is what everyone wants.

It is important to note, however, that a portion of ownership of that property may be reappraised. Let’s say that 50% of a home is transferred under Proposition 13, and the changes that the Tax Assessor is going to reassess is 50% of the home at the current market rate, as per the transfer date, so 50% will be deducted from the base year value, under Proposition 13 property tax relief… 

Typically, when someone buys a home, the home goes through a “change in ownership” and 100% of the home is reassessed at full current market value.   Even if the outcome of transferring real estate is a change in ownership, there are a number of exclusions from paying current tax rates – and so certain homes or other real estate will often not be be reappraised under these sorts of home transfers.

If a property owner files the proper claim, an exclusion from paying updated current property taxes will kick in as long the owner’s property, or portions of this property, are correctly excluded from reassessment.

The best way to cover changes in ownership that are excluded from automatic reassessment, or reassessment by claim; is to enlist the help of a tax attorney, a property tax consultant, or a trust lender who specializes in establishing a low property tax base for heirs upon inheriting a home from a parent.

Frequently, this will assist beneficiaries in buying out inherited property shares from co-beneficiaries through a loan to an irrevocable trust, which realtors and property tax specialists call a transfer of property between siblings or a sibling-to-sibling property transfer – working in conjunction with a California Proposition 19  parent to child property tax transfer on an inherited home – a parent-to-child exclusion (from property tax reassessment at full, current market rates), to establish a low property tax base.  

Naturally, this line of property tax relief, based on a parent’s property  also includes the ability to transfer property taxes when inheriting property taxes from a parent. Under these tax breaks, a property tax transfer like this can help heirs keep parents’ property taxes basically forever, based on a parent-child transfer; or a parent to child exclusion from reassessment – to legally avoid property tax reassessment.

You can always consult your Tax Assessor, however it is generally in the Tax Assessor’s best interest to charge you the maximum amount possible. A property tax consultant or trust lender, on the other hand, is motivated to save you money on taxes, not see you spend more.